GOP to keep income tax rate for wealthiest earners

President Donald Trump speaks at a meeting with business leaders on tax reform at the White House in Washington, D.C., on Oct. 31, 2017. On left, is Treasury Secretary Steve Mnuchin.(Photo: Nicholas Kamm / Getty Images)

Washington — Furiously working to finish a tax bill, House Republicans have decided to keep the income tax rate for the wealthiest earners in the face of Democratic criticism that the overhaul pushed by President Donald Trump would benefit the rich.

The GOP blew past its self-imposed deadline for public release, with the rollout now set for Thursday. Trump set an ambitious by-Christmas timetable for passage of what he hopes will be the first major rewrite of the U.S. tax system in three decades.

Tax writers decided to maintain the highest personal income tax rate at its current 39.6 percent and to slash the corporate tax rate to 20 percent from 39 percent. They strained to complete other last-minute changes, but failed to finalize details to meet their Wednesday deadline for a public release.

“We are making excellent progress. We are very close,” said Rep. Kevin Brady, R-Texas, chairman of the tax-writing Ways and Means Committee. “A lot of work remains with the drafters, they are continuing to work through the night. We are moving forward.” The committee plans to vote on the bill next week, he said.

Details such as those applying to each tax bracket will be essential to evaluate how the tax plan will benefit average individuals and families.

Trump has intensified his lobbying for the nearly $6 trillion tax overhaul plan, driven to score a major legislative achievement after the collapse of the Republicans’ attempted repeal of the Obama-era health care law. Republicans see taxes as a political imperative that will determine whether they keep their majorities in the House and Senate in next year’s elections.

The president set an aggressive timetable for the legislation and predicted a grand signing ceremony before Christmas at “the biggest tax event in the history of our country.”

Late Tuesday after word came of the delay, Trump renewed his cheerleading on Twitter.

“The Republican House members are working hard (and late) toward the Massive Tax Cuts that they know you deserve. These will be biggest ever!”

The plan outline released last month by Trump and Republican leaders in Congress called for shrinking the number of tax brackets from seven to three or four, with respective tax rates of 12 percent, 25 percent, 35 percent and to be determined. The tax system would be simplified, and most people would be able to file their returns on a postcard-sized form.

The plan calls for nearly doubling the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families, and increasing the per-child tax credit. In addition to slashing the corporate tax rate, it also seeks to repeal inheritance taxes on multimillion-dollar estates, a big break for the wealthy.

The plan drew immediate criticism from Democrats, who complained it was too favorable to the wealthy and contradicted Trump’s rhetoric of bringing relief and economic benefit to the stressed middle class.

Brady did not answer directly when asked whether the drop in the corporate tax rate would happen immediately or be phased in. But, he said: “I want as much growth right from Day One as I can.”

With the House Republicans deep in negotiations at the Capitol, Trump made his pitch.

“The process is complicated but the end result will not be that complicated,” he said in the White House’s Roosevelt Room, joined by more than a dozen leaders from the business and trade worlds. “It’s going to be: People are going to pay less tax by a lot, companies are going to pay less tax by a lot — that’s a big difference — and companies are going to start rebuilding and they’re going to stay here.”

Trump said he’s directing Treasury Secretary Steven Mnuchin, White House economic adviser Gary Cohn and other administration officials to stay behind when he heads for Asia on Friday so they can help sell the tax proposal. The White House said Ivanka Trump, the president’s daughter and adviser, had canceled plans to accompany the president to China and South Korea to help push the package.

The president said he was hopeful the House will approve the tax bill by Thanksgiving. But his overly optimistic timetable didn’t address the concerns of lawmakers from states such as New York and New Jersey, who have opposed a proposal to eliminate the federal deduction for state and local taxes, arguing it would hurt their constituents and subject them to being taxed twice.

A battle has continued over contributions to 401(k) retirements accounts. The financial industry and some Republican lawmakers insist that the GOP plan not change the tax benefits of the popular savings vehicles, as has been floated by GOP leaders.